Question

After conducting a market research study, Magnificent Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $250. The annual target sales volume for interior doors is 28,000. Magnificent has target operating income of 40% of sales. What is the target operating income?

a. $2,800,000
b. $4,200,000
c. $7,000,000
d. $9,800,000

Answer 1

Operating income= $2,800,000

Step-by-step explanation:

Giving the following information:

Selling price= $250

Units to be sold= 28,000

Target operating income= 40% of sales

First, we need to calculate the total sales:

Total sales= 250*28,000

Total sales= $7,000,000

Now, the target operating income:

Operating income= 0.4*7,000,000

Operating income= $2,800,000